Investing Carat by Carat

Art and diamonds are rarely mentioned when discussing hot investment
commodities, but the wealthy are investing there and prices are skyrocketing,
says Eric Bradley.

With major art and auction houses notching some record sales, what
are some of the items that investors are buying these days? We're asking Eric
Bradley that question. So Eric, what are you seeing that people are interested
in?

We're seeing the ultra-wealthy start to put their money into fixed objects
that have a sense of scarcity and also have a sense of a growing demand in the
future. So the wealthy have known for a long time that when there's a lot of
uncertainty in the market, a lot of fixed objects are a good source just to ride
out market fluctuations, just to preserve their capital.

So we're seeing art auction houses record some of the highest sales they've
ever had. We're seeing antique auction houses expand nationwide. They're
starting to buy real estate in big cities, closer to populations. We're seeing
stock prices of the publicly traded auction houses do very, very well
considering the uncertainty in the market compared to other equities.

Along the areas of what people are buying, we're looking at American art
doing very well. Contemporary art is doing very well. We're seeing an influx in
investment into gems and diamonds, which we had not normally seen-although in a
lot of ways colored stones have not lost their value in 37 years-but over the
last decade we're seeing the price of one-carat clear diamonds rise in value at
a rate that outperforms gold bullion.

Those are headlines you don't read very often, because it's kind of hard to
quantify that-there are not very many funds that track diamond and jewelry
sales-but the wealthy, the $5 to $10 million set, are putting a lot of their
capital into these objects.

It's interesting. So Eric, when you're talking about what's being
purchased in the US, are these domestic buyers or are they from overseas, or
both?

Well it's a very good question. What we're seeing now is that there's a shift
in the wealth that's being created, and a lot of it is being shifted to the BRIC
economies. So you have Brazil and Russia and India and China.

We're seeing a rise of wealth-of the super-wealthy really is a good way to
put it-in places like China and India. One statistic put the rise of the
increase in non-financial wealth in China and India has grown 173% in the last
decade from about $5,000 per head to almost $14,000. That's a lot of money very
quickly.

These people are also getting their wealth at a time when conventional
investing advice really doesn't prove accurate anymore. So we're seeing buyers
look at the United States as a source for new items.